Playing against (with?) the devil: Managing financial risks for better corporate return

Michel Crouhy and Eric Briys

European Management Journal, 1993, vol. 11, issue 3, 304-312

Abstract: The message that finance cannot do much to enhance shareholder value appears to conflict with the everyday business observation that firms do care about finance -- by hiring CFOs and treasurers and paying careful attention to financial strategies suggested by them. We know now that CFOs can enhance corporate share values by identifying and taking advantage of market imperfections. Michel Crouhy and Eric Briys discuss practical ways in which firms can benefit from a knowledge of finance. The first is to recognize that financial markets do take a long-term view and that 'cash is king'. Second, firms should hedge for several reasons including taxes, symmetric information, credibility with clients, employee stability, the cost of bankruptcy and borrowing costs. Instruments for hedging currency, commodity and interest rate risk are discussed.

Date: 1993
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